France-based Gemalto hoped for a licensing cash cow: tens of millions of euros.

Google and its handset-making partners have defeated a major patent-holding company that threatened to weigh Android phones down with even more royalty payments. A panel of three judges on the nation's top patent court have ruled that Android phones don't infringe on three patents owned by French digital security firm Gemalto.

Yesterday's ruling (PDF) puts an end to a legal battle that Gemalto kicked off in 2010 when it sued Google, Samsung, HTC, and Motorola in the Eastern District of Texas. Gemalto said Android phones had memory-utilization features that it had developed first at its research center in Austin.

Gemalto's invention was a way to allow low-power devices to run "high-level programming languages, such as Java," according to the ruling from the US Court of Appeals for the Federal Circuit. It accused the defendant companies of infringing three of its patents, numbered 6,308,317, 7,117,485, and 7,818,727.

However, the defendant companies were successful in arguing that their smartphones do not infringe because they aren't "resource-constrained devices" as described in the Gemalto patents. Rather, they "rely on off-chip memory to run Java applications, similar to prior art personal computers," wrote the judges.

Gemalto said that the accused Android smartphones infringed when they "temporarily load program instructions from off-chip memory into on-chip cache memory before execution," but the district court judge ruled that "cache memory is substantially different from permanent memory and not equivalent for infringement purposes." The appeals court agreed.

It's fairly unusual that Gemalto lost on a summary judgment ruling at all. Summary judgment is when judges rule on a case without a jury trial because they believe the case can be resolved solely on a legal basis, without any need for the kind of fact-finding involved with a jury trial. Such rulings are fairly common in patent cases, but not in the Eastern District of Texas, where judges prefer to refer litigants to a jury trial. It's one factor that makes East Texas continue to be seen as a favorable district for patent plaintiffs.

If Gemalto's patent case had succeeded, it would have had a major impact on Google. Most patent lawsuits today are filed by so-called "patent trolls" with no business outside of licensing, but the rare cases brought by operating companies can be uniquely threatening. With €2.4 billion in revenue and 14,000 employees, Gemalto was able to fund a major legal attack, hiring top-tier patent lawyers from McKool Smith.

"We are certainly disappointed by this judgment with regards to the scope of use of some of our intellectual property," Olivier Piou, the company's chief executive, said in a statement. The loss didn't invalidate their patents, so it has "no impact on our historical patents licensing activity, nor on the Company’s 2017 long-term objectives," wrote Piou.

Wall Street analysts who follow Gemalto foresaw some impact from the ruling, and Gemalto shares, which are traded in Amsterdam, fell 1.8 percent this morning, according to a Reuters report on the ruling.

ING analysts who follow Gemalto said in a note to investors that the company's loss at the Federal Circuit was "disappointing," as it "erodes a 3 percent earnings increase potential" that could have taken place if the company was able to slap licensing fees on Android.

"We had estimated that if Gemalto had won the case, the company could have been entitled to either a one-off payment in damages or higher royalty receipts that could amount to 30-50 million euros ($41-$68 million) per annum," the ING analysts said.

Promoted Comments

Wait, what? A patent troll lost a case, first in East Texas, then at the CAFC? The court that single-handedly opened the doors to patent trolling of all kinds with its ridiculous patent maximalism? That CAFC?

Did I take a left turn at Albuquerque this morning into Bizarro World?

You know what's even more shocking? Look at the CAFC panel: Newman, Rader, and Dyk. It is hard to get a more patent-holder friendly set of judges than those three at the CAFC. Also, John Whealan (who argued for Gemalto at the CAFC) is a well-respected former USPTO Solicitor and current professor & dean of IP at GW Law. If you can't win an argument with the cards falling that well in your favor, then you've really got a weak case.

(Moreover, Rader and John Whealan are pretty close, at least in the professional setting. Rader had Whealan guest-teach in his patent law classes at GW Law for years when Whealan was Solicitor at the USPTO, before Whealan became a dean & professor himself. I guess no recusal was needed because, at some point you can't recuse yourself as a judge just because you get to know people in your field, only when you actively promote them.)